Ahead of a forthcoming meeting of the provincial and federal finance ministers set to take place in Vancouver June 20-21 to consider possible reforms to the Canada Pension Plan (CPP), the financial services sector concedes that some changes may be warranted, but it is lobbying for targeted reforms.
A collection of industry trade groups — including the Investment Industry Association of Canada (IIAC), the Investment Funds Institute of Canada (IFIC), Advocis, the Canadian Life and Health Insurance Association Inc. (CLHIA), the Financial Planning Standards Council (FPSC) and the Portfolio Management Association of Canada (PMAC), among others — acknowledges in an open letter to policymakers that there are certain segments of the Canadian population that are not properly prepared for retirement.
Nevertheless, the letter argues that this situation is not universal and, consequently, that reforms should target the segments that are most vulnerable: "Any ‘one-size-fits-all' approach could prove harmful to the economy as a whole and be unnecessary for many." Instead, the groups maintain that policymakers should target measures at addressing specific vulnerabilities.
The letter singles out Canadians who are living below the poverty line; "modest" income workers who don't have workplace pensions or private savings; and higher-income workers who also don't have pensions or adequate retirement savings as groups that may face a decline in living standards due to a lack of retirement savings.
Of these groups, the letter argues that so-called "modest-income" workers (who earn more than $27,500 annually) "would benefit most from a modest increase" in CPP contributions. In contrast, higher-income workers should have access to workplace retirement plans, it says.
For Canadians living below the poverty line, "more could and should be done, such as eliminating the clawback for a surviving spouse" under the CPP, the letter says.
At the same time, a new report from the Vancouver-based Fraser Institute argues that expanding the CPP would likely not help one of the most vulnerable groups, low-income retirees, because many of them have a limited work history.
"Those who have not worked, or worked only a little outside the home, have made limited contributions to the CPP. Those contributions are a key determinant of the CPP retirement benefit, so expanding the CPP would do little or nothing to help Canadian seniors with a limited or no work history," the Fraser Institute report says.
Moreover, the report adds that even low-income retirees who have accumulated CPP benefits may not benefit from expanded entitlements "because a higher CPP benefit could simply result in a reduction in government-provided benefits targeted at low-income seniors, such as the Guaranteed Income Supplement."
"If we're truly interested in helping financially vulnerable seniors, then we need to discuss reforms to programs targeting low-income seniors—not the CPP," says Charles Lammam, director of fiscal studies with the Fraser Institute, in a statement.
Although the collection of industry trade groups acknowledges that some CPP reform would be helpful for certain groups, it calls on the various levels of government to "pursue a national, multi-faceted approach" to improve retirement income security.
"It should be fair, so that it doesn't introduce inter-generational transfers or require over-saving where it is not needed," the letter says. "It should be cost-efficient and easy to implement. It should minimize administrative burdens for employers. And it should be good for the economy."
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